Gold Set for Record Highs as Central Banks and ETFs Drive Demand, Goldman Sachs Forecasts $3,700 by End-2025 (Possible $3,880 in a Recession)

Gold has moved into sharper focus among traders, investors, and central banks alike, underscoring its enduring role as a financial asset with a history of dramatic rallies and sharp downturns. Despite pronounced volatility, the precious metal has repeatedly reached fresh records in recent years. Since March, investors have been steadily expanding their gold holdings amid concerns about the health of the economy and ongoing market volatility. Looking ahead, Goldman Sachs Research argues that two key forces—extended central-bank demand and persistent, multi-year interest in gold from policy authorities—will continue to push the metal toward new record highs. Their forward-looking view hinges on these structural drivers remaining in place over an extended horizon, suggesting a sustained bullish trajectory rather than a temporary spike. In their 2025 outlook, the analysts emphasize that these two factors are likely to dominate the price path, reinforcing gold’s appeal as a hedge and strategic asset in a diversified portfolio. This framing sets the stage for a deeper examination of the price trajectory and the underlying dynamics shaping the gold market as we move through 2025.

The Current Focus: Why Gold Is Drawing Fresh Attention

Gold’s renewed prominence in financial markets stems from a convergence of demand from official institutions and the ongoing appetite of risk-averse investors seeking shelter from volatility. At the center of this trend is the ongoing accumulation by central banks, which have been buyers of bullion for years and appear to be maintaining that stance in the current environment. The rationale for central-bank purchases revolves around several themes. First, gold is seen as a reliable store of value when real yields are low or negative and when inflation hedges are uncertain. Second, bullion holdings provide diversification benefits within reserve portfolios and serve as a non-dollar signaling option amid shifting currency dynamics. Third, geopolitical tensions and macroeconomic risks continue to fuel precautionary demand as authorities seek to balance domestic financial stability with the aspiration to preserve purchasing power over time. Taken together, these considerations keep central banks a persistent, if evolving, source of demand for gold.

The second pillar driving the current rally is a notable shift in investor behavior toward exchange-traded products and other passive vehicles that hold gold on behalf of a broad base of buyers. Historically, the gold rally had been driven heavily by central-bank purchases; in recent years, however, ETF holdings have joined the ascent, amplifying price momentum. This shift matters because ETFs provide a liquid, scalable channel for inflows, enabling a wider range of investors to gain exposure to gold without the friction of owning physical bullion or dealing with the intricacies of futures markets. As ETF demand rises, competition for available bullion intensifies, placing upward pressure on spot and futures prices and reinforcing the upside potential as new buyers enter the market. In parallel, the broader market environment—characterized by elevated volatility, concerns about growth, and interest-rate trajectories—continues to support gold’s role as a risk-off play and portfolio ballast.

Market participants also point to the appealing characteristics of gold in a world where traditional hedges may underperform during stress episodes. Even as equities retreat during downturns, gold has historically demonstrated resilience, aligning with investors’ preference for assets that can preserve value when confidence in risk assets wanes. The combination of central bank demand and ETF inflows has created a two-pronged dynamic: official-sector purchases provide a floor under the gold market, while ETF-related buying accelerates the pace of price discovery when risk sentiment shifts. This dual force—central banks as a persistent foundation and ETF buyers as a flexible, high-frequency driver—forms the backbone of the current gold narrative and helps explain why the metal remains at topic status for traders and policymakers alike.

Within this broader context, the supply and structural balance of the bullion market influence the price mechanism. Gold’s supply is not infinitely elastic: new mine output and recycled stocks respond to price signals, and the cost curves of production shape the responsiveness of supply. When demand from central banks and investors climbs, the market faces a squeeze as the available bullion is absorbed by buyers in a relatively short period. This dynamic tends to support higher prices, particularly when momentum among ETF holders amplifies the pace of inflows. The interplay between official demand and investor appetite results in a price-building mechanism that can persist through multiple quarters or years if the fundamental drivers remain intact. The current environment reinforces this view, suggesting that the gold market could sustain elevated prices as long as central banks continue to accumulate and ETF buyers remain engaged.

Driving Forces Behind the Rally

• Central-bank purchases: Persistent official demand, including monthly acquisitions of gold by many central banks, serves as a durable underpinning for prices. This ongoing activity provides a price floor and helps explain the resilience of gold during episodes of market stress, while signaling policymakers’ long-term view of gold as a strategic asset within reserve portfolios.

• ETF inflows and investor optimism: A shift from relying solely on central-bank buys to incorporating ETF flows broadens the base of buyers and accelerates price responses to changing sentiment. ETF inflows tend to be highly sensitive to macro developments, such as shifts in expected inflation, real rates, or expectations of monetary-policy ease. When these streams synchronize with central-bank demand, price momentum can accelerate, pushing gold toward fresh highs.

• Inflation hedging and real-rate dynamics: Gold’s appeal as a hedge against inflation remains a central theme in many strategic debates. As investors weigh the probability of higher price levels and the erosion of purchasing power, gold often benefits from demand as a non-yielding asset that does not depend on coupon income. At the same time, the path of real interest rates—net of inflation—exerts a closely watched influence on gold, with lower real rates generally supportive of higher gold prices.

• Market volatility and risk-off sentiment: Heightened volatility tends to lift safe-haven assets, with gold often benefiting when confidence in riskier assets erodes. As investors seek protection against downside scenarios, gold’s historical function as a store of value and stabilizing presence in a diversified portfolio makes it a natural recipient of capital when uncertainty rises.

• Relative scale considerations: Perspectives on gold’s price potential are often framed relative to the size of competing asset markets. For example, the global gold ETF market represents a small fraction of the broader debt and equity universe, which means even modest shifts in allocation can have outsized effects on gold prices. The comparatively small share of gold-related assets relative to larger benchmarks supports the view that even incremental inflows can have a material price impact.

Taken together, these forces describe a market in which gold could remain bid for an extended period, as long as the drivers of demand stay in place and the macro backdrop remains supportive of the asset’s role as a store of value and a risk-management tool. The current setup, in which central banks continue to accumulate and ETF buyers participate in the rally, offers a compelling framework for forecasting gold prices over the medium term, with a bias toward continued upside pressure if the broader economic narrative remains unsettled.

Gold Price Outlook for 2025: Forecasts and Scenarios

Goldman Sachs Research has outlined a 2025 price trajectory anchored in the expectation of ongoing central-bank purchases and sustained ETF demand. In their model, the combination of official sector buying and investor-led inflows is projected to lift gold prices to new highs over the course of the year. The analysts cite a path toward $3,700 per troy ounce by the end of 2025, starting from approximately $3,220 on a mid-May reference point. This forecast underscores the belief that central banks will continue to accumulate, while ETF investors add to their holdings in anticipation of rate cuts and ongoing macro risks. The price target represents a notable move relative to current levels and signals a belief that the gold market can sustain a higher plateau if the core drivers persist.

Within this framework, the scenario with prices climbing to $3,700 by year-end 2025 rests on continued, robust central-bank demand and the willingness of ETF investors to maintain or expand exposure to bullion. The analysis also highlights the role of interest-rate expectations, with the prospect of rate cuts acting as a catalyst to push gold higher as real yields soften and investors reallocate to non-yielding or partially hedged assets. ETF buyers are expected to bolster the rally, reinforcing a price trajectory that benefits from flows as investors seek protection against macro uncertainties.

A recession scenario adds another layer to the forecast. In a downturn, Goldman Sachs Research posits that gold could rise to as high as $3,880 per troy ounce. The logic rests on the dual incentives of safe-haven demand and portfolio diversification as risk assets falter. In such a stress environment, the demand for bullion tends to intensify, with both central banks and private investors accelerating purchases to preserve value and hedge against downside risk. The potential for a broader flight into gold during a recession is a critical risk-off dynamic that could push prices beyond baseline forecasts.

Private investors, who often seek diversification away from US assets during periods of market stress, may contribute meaningfully to the upside of gold in the event of a broad equity or currency retreat. If traditional hedges such as US Treasuries fail to deliver acceptable protection or if equity markets experience significant drawdowns, a portion of private capital may rotate into gold to reduce portfolio risk. Although the base-case forecast emphasizes central-bank drivers and ETF flows as the primary engines of the rally, even a modest reallocation of wealth from the United States into gold could create outsized price responses because of the market’s relatively small size for gold exposure compared to the scale of some other benchmark assets.

The central-bank versus ETF dynamic described by the analysts is important for understanding the potential magnitude of the move. ETF holdings in aggregate remain a small fraction of other major asset pools. For example, the global gold ETF market represents around 1% of the outstanding US Treasuries and roughly 0.5% of the market capitalization of the S&P 500. This disparity implies that even small shifts in allocation toward gold from large, liquid US assets can have outsized price implications, particularly when coupled with persistent central-bank buying. As Thomas notes, ETF investors are increasingly joining the gold rally, and as both central banks and ETFs compete for bullion, the upward pressure on prices could intensify beyond previous cycles.

The overarching narrative is that the price path for gold in 2025 will be heavily influenced by the persistence of the key drivers identified above. The base-case forecast emphasizes continued central-bank purchases and ongoing ETF inflows, which create a supportive environment for prices to drift higher. The possible recession scenario, while not the central forecast, remains a plausible tail risk that could push prices toward or beyond the $3,880 level if global economic weakness intensifies and risk appetite remains constrained. In either case, the market remains attentive to the complex interaction between official demand, private-sector participation, and the macroeconomic backdrop that shapes gold’s appeal as a hedge and store of value.

Scenario Analysis: What Could Move Prices Significantly

• If central banks maintain a steady cadence of purchases, gold could grind higher toward the $3,700–$3,800 range by year-end, assuming ETF inflows remain robust and rate expectations stay conducive to non-yielding assets.

• If ETF inflows accelerate further in response to improved risk-off sentiment or renewed inflation concerns, the rally magnitude could exceed the base forecast, with prices testing new highs as supply constraints tighten and market positioning amplifies momentum.

• If a recession unfolds more severely than currently anticipated, a sharper move into gold could materialize, potentially aligning with the higher end of the predicted band around $3,880 per ounce, driven by a flight-to-safety dynamic.

• If inflation pressures abate quickly and central banks begin to pivot toward tighter policy or a faster normalization, gold could face headwinds, though the structural demand narrative might cushion downside versus other cyclically sensitive assets.

• Private-asset inflows into gold could surprise to the upside if investors look to diversify away from US-centric risk and as non-traditional buyers scale up their gold allocations in a more systematic fashion.

Market Structure and Competition for Bullion

The gold market’s structure features a nuanced balance between official reserve demand and private market participation. Central banks act as a stable, long-horizon buyer, contributing to a floor under prices and signalling a persistent appetite for gold in reserve portfolios. Their purchases tend to be deliberate, measured, and influenced by strategic considerations about currency diversification, inflation hedging, and financial stability. This official demand can shape the market’s long-term trajectory, especially when combined with macroeconomic uncertainty that sustains investors’ search for safe havens.

Complementing this foundation is a growing wave of ETF-driven demand that translates into higher liquidity and greater reach for individual and institutional investors. ETFs create a practical route for capital to flow into gold with relative ease, broadening the market beyond the reach of only those who physically hold bullion or engage in futures trading. As ETF inflows increase, they add to the market’s price discovery mechanism, particularly during periods when risk sentiment shifts rapidly and investors seek instant exposure or hedges against potential downturns.

The competition for bullion between official holders and ETF investors has the potential to influence price formation. When both groups require bullion concurrently, the resulting demand pressure can lead to tighter market conditions and higher prices. This dynamic helps explain why the gold market has experienced sustained strength even in periods that might otherwise have seen a cooling of interest. The relative scale of ETF demand versus the size of the government bond market is a useful frame of reference for assessing the potential magnitude of gold price moves. In this context, the modest share of gold ETF holdings relative to large-scare asset pools implies that relatively small shifts in allocation can lead to outsized price responses due to limited liquidity cushions and the speed with which ETF flows can move prices.

From a market-structure perspective, the bullion ecosystem also includes supply-side considerations, including mine production, recycling of jewelry, and the availability of newly mined gold in a relatively stable, predictable cadence. Supply constraints, if they emerge due to mining cycles, geopolitical risks, or disruptions in refining capacity, can reinforce price strength when coupled with rising demand. Conversely, any signs of a supply surplus or a sharp improvement in production efficiency could temper price gains, though such dynamics often take time to feed through to the market given the long lead times in mining projects.

Implications for Market Participants

• For central banks, the ongoing demand underscores gold’s role as a strategic, long-duration asset that complements other reserve instruments and acts as a hedge against potential policy missteps or currency shocks.

• For ETF holders, the liquidity and ease of access provided by bullion-linked funds reinforce the appeal of gold as a tactical hedge and a portfolio diversifier, particularly in uncertain macro environments.

• For private investors, the practical advantages of gold exposure via ETFs or other vehicles expand the set of tools available to manage risk and seek hedges against inflation and tail events.

• For traders, the market’s sensitivity to macro surprises, combined with the dual demand channels, creates potential for price swings that can be traded with careful risk management and strategic positioning.

Overall, the market structure suggests a continued collaboration between official demand and private-sector participation, with bullion prices resonating to the tone of macro developments and risk sentiment. The competition between central banks and ETF buyers, while not a direct duel, creates a dynamic that can push prices higher as each side seeks to secure bullion in a market with finite supply, reinforcing the case for a sustained elevated price environment in the medium term.

Investor Implications and Portfolio Strategy

The current gold outlook has several practical implications for investors across asset classes. First, gold is positioned as a hedge against a broad set of macro risks, including inflation surprises, currency fluctuations, and equity volatility. In portfolios where risk management is a priority, gold provides diversification benefits that can reduce overall drawdowns during stress episodes. Investors may consider maintaining a core allocation to gold that reflects their tolerance for volatility and their expectations for macro conditions, recognizing that the asset’s price behavior remains sensitive to policy signals, rate paths, and the evolution of risk appetite.

Second, the potential for higher gold prices driven by central-bank demand and ETF inflows supports a longer-term view that does not rely on short-term timing. Rather than chasing momentum on a daily basis, investors can integrate a strategic approach that aligns with core risk-management principles. This includes establishing sensible position sizes, employing risk controls, and using a combination of physical gold exposure and bullion ETFs to balance liquidity with defensive properties. The aim is to preserve downside resilience while capturing the potential for price appreciation as the macro backdrop remains uncertain.

Third, a key strategic takeaway is the importance of monitoring the evolving mix of buyers in the gold market. If ETF flows continue to rise, and central banks remain active buyers, gold’s price trajectory may remain more persistent than in prior cycles. That implies a need to stay alert to shifts in expectations around monetary policy and inflation, as well as to any signs of scaled-down purchases by major central banks. Investors who anticipate or respond to such shifts may position themselves to benefit from sudden turns in gold prices, particularly in environments characterized by heightened volatility and unexpected policy moves.

Additionally, the small relative size of gold-related assets in the broader investment landscape means that even modest shifts in allocation can generate outsized price responses. This reality invites careful consideration of portfolio rebalancing, where a measured increase in gold exposure could offer meaningful protection against systemic risk while adding a potential upside from a sustained bull market. For those who favor a more tactical approach, periodic reviews of gold exposure in response to macro surprises can help ensure that allocations remain aligned with evolving risk-reward dynamics.

In sum, the gold outlook for 2025 presents a framework in which the asset can continue to strengthen if central banks maintain a steady course and ETF demand remains robust. The forecast includes a plausible path to around $3,700 per ounce by year-end, with a recessionary scenario offering a higher upside scenario near $3,880 per ounce. Investors should interpret these forecasts as part of a broader risk-management strategy that accounts for the asset’s unique characteristics, including its sensitivity to policy shifts and its role as a diversification instrument in diversified portfolios.

Risks and Considerations

As with any forward-looking assessment, there are important caveats and risk factors to acknowledge. While the central-bank and ETF-driven narrative provides a plausible basis for higher gold prices, several variables could alter the outcome. Policy decisions, such as the pace and stance of interest-rate changes, can influence real yields and the relative attractiveness of non-yielding assets like gold. If inflation expectations ease or if real yields turn decisively higher, gold may face headwinds that temper upside momentum. Conversely, any escalation in geopolitical tensions or financial market stress could deepen demand for gold as a safe-haven asset, reinforcing the bullish thesis.

Liquidity dynamics also matter. Although ETFs have expanded access to gold, a sudden and sustained withdrawal of ETF inflows could challenge price momentum. The presence of large, tradable positions tied to gold may also invite market volatility in times of stress, underscoring the importance of risk management and position sizing for participants who proxy gold exposure through leverage or derivatives. The variability of supply—driven by mining cycles, geopolitical risk in major producing regions, and refinery capacity—could further complicate price behavior, particularly if demand continues to outpace immediate physical supply.

Disclaimers about investment suitability and risk remain essential. The narrative around gold’s price path should be interpreted within a framework that recognizes the asset’s status as a hedge rather than a guaranteed source of return. As with any financial instrument, gold investments come with a spectrum of risks, and outcomes may diverge from forecasts. Readers should approach the information with a clear understanding of their own investment objectives, time horizons, and risk tolerance.

This article’s purpose is educational, highlighting key drivers and forecast scenarios for gold based on current market dynamics. It does not constitute investment advice and is not a recommendation to buy or sell any asset. The content is intended to inform readers about possible market developments and should be used in conjunction with independent research and professional guidance.

Conclusion

Gold remains a focal point for markets as investors, traders, and policy makers weigh its dual role as a hedge and a potential growth asset within diversified portfolios. The current rally is underpinned by a combination of persistent central-bank purchases and expanding ETF exposure, a dynamic that continues to push the metal toward new highs in an environment marked by volatility and inflation concerns. Goldman Sachs Research’s central projection places gold on a path to around $3,700 per ounce by the end of 2025, with a plausible upside scenario near $3,880 in a recessionary backdrop. The emphasis on the interplay between official demand and private investment highlights the metal’s potential to perform even if one driver weakens, so long as the other remains supportive.

For investors, the key takeaway is to approach gold with a disciplined, long-term framework that recognizes its role as a risk-management tool and its potential for outsized moves driven by macro surprises. As central banks continue to accumulate and ETFs broaden participation, gold could sustain a higher price level than in prior cycles, particularly if the broader economic outlook remains uncertain and risk aversion persists. Maintaining a balanced, well-structured exposure to gold—whether through physical holdings, ETFs, or a combination of strategies—can help investors capture its potential upside while managing downside risk in an evolving market landscape.